In Depth Analysis and Key Takeaways of CMS’ Final Rule on Civil Money Penalties for Section 111 Reporting
Authored by Brendon Desouza Esq.
CMS Publishes Final Rule Regarding Civil Money Penalties
Today, the Centers for Medicare & Medicaid Services (CMS) published its Final Rule regarding Civil Money Penalties (CMPs) in the Federal Register. The Final Rule specifies how and when both Group Health Plans (GHPs) and Non-Group Health Plans (NGHPs) will be subject to CMPs for failure to satisfy their Medicare Secondary Payer (MSP) reporting obligations. This article is intended to simplify the roughly forty (40) page Final Rule through a “Question & Answer” style format, which readers may find helpful:
When will the Final Rule become effective, and what is the earliest date that a CMP may be imposed?
The Final Rule becomes effective sixty (60) days after its publication date (December 11, 2023), but it only becomes applicable one year after its publication date (October 11, 2024). A CMP may not be imposed until at least one year after the later of either 1) October 11, 2024, or 2) the settlement date (Total Payment Obligation to the Claimant reporting, or “TPOC”) or assumption of Ongoing Responsibility for Medicals (“ORM”) date that an NGHP is required to report.
This represents one of several deviations from the previously proposed rule, and NGHPs will now have at least one year from October 11, 2024 before any CMP is contemplated.
What are the conditions under which a CMP may be imposed?
The Final Rule defines “noncompliance” as “any time CMS identifies a new beneficiary record that was not reported to CMS timely.” The Final Rule cites failure to timely report TPOC or the assumption of ORM as CMP-eligible events.
This represents a major shift in CMS’ approach to levying CMPs. Previously, CMS proposed contradictory reporting data and exceeding an error threshold tolerance as CMP-eligible events. These are now eliminated, and non-compliance is strictly based upon timely TPOC and assumption of ORM reporting. Notably, untimely termination of ORM will not result in a CMP.
What “Safe Harbors” preclude CMS from imposing CMPs?
NGHPs are protected against CMPs in any of the following scenarios:
1. Untimely reporting caused by a technical or system issue outside of the NGHP’s control;
2. Untimely reporting due to a CMS or contractor error;
3. Untimely reporting due to lack of cooperation from a Medicare beneficiary who fails to provide necessary reporting information;*
4. If CMS provides at least six (6) months’ notice to system alterations or changes to required data elements, CMPs will not be assessed with respect to the specific alteration(s) for at least two (2) reporting periods following the effective implementation date;
5. If CMS is unable to provide at least six (6) months’ notice to system alternations or change to required data elements, CMPs will not be assessed with respect to the specific alternation(s) for at least one year following the effective implementation date; or
6. Any other scenarios where it may be inappropriate to penalize an NGHP for noncompliance (this is a general catch-all provision, but we anticipate this to apply to scenarios where, for example, an NGHP meets reporting exclusions as detailed in the MMSEA Section 111 User Guide or other policy guidance established by CMS).
Notably, the Final Rule expands the third enumerated safe harbor to allow NGHPs to make at least two attempts to obtain the required information by mail or electronic mail, and the third attempt may be made by mail, electronic mail, or some other reasonable method. Should the individual or their representative clearly and unambiguously confirm that they will not provide the requested information, the NGHP is no longer required to continue further follow-up attempts.
How is “Timeliness” Defined?
Timeliness is defined as reporting to CMS within one year of “the date of settlement, judgement, award or other payment determination was made (or the funding of a settlement, judgment, award, or other payment, if delayed), or the date when an entity’s Ongoing Responsibility for Medicals became effective.”
CMPs begin accruing one year after the date that reporting was initially required. Example: A settlement (TPOC event) occurs on January 1, 2028, and the NGHP does not report until March 1, 2029. The NGHP will be considered noncompliant for the period of January 2, 2029 through March 1, 2029.
What is CMS’ statute of limitations to impose CMPs?
CMS will apply a five (5) year statute of limitations pursuant to 28 U.S.C. § 2462, meaning that CMS may only impose a CMP within five (5) years from the date that the “noncompliance occurred.”
As some may recall, the previously proposed rulemaking indicated that CMS could impose a CMP within five (5) years from the date that the noncompliance “was identified by CMS.” Given evidentiary concerns on establishing when CMS may have identified a potential noncompliance, we are pleased that the Final Rule provides a more definitive look-back date.
What if I disagree with CMS’ notice of a potential CMP against my organization?
CMS will provide the NGHP with written “pre-notice” (prior to asserting a formal CMP action) whereby the NGHP will be permitted to provide any defenses or mitigating evidence within thirty (30) days for CMS to consider. Thereafter, CMS may issue formal notice of an imposed CMP pursuant to 42 CFR § 402.7. An NGHP subject to a formal notice of a CMP will be afforded the opportunity to request an Administrative Law Judge (ALJ) hearing within sixty (60) days, and an unfavorable ALJ decision may be appealed to the Department Appeals Board within thirty (30) days.
Readers will note that this process is similar to CMS’ existing administrative appeals process for conditional payment recoveries. Given the potentially significant amount of penalties that may be in dispute in any given case, we hope that CMS’ processing times will not spike as seen in 2020 ALJ conditional payment processing times (average ALJ processing times for conditional payment appeals peaked at 1,430 days in 2020).
If a CMP is imposed, how will CMS calculate the amount of the penalty?
CMS has statutory authority to adjust the amount of CMPs against NGHPs, which allows CMS to implement a tiered system for imposing penalties:
· For each calendar day of noncompliance, the daily penalty is $250.00 where the record was reported 1 year or more, but less than 2 years, after the required reporting date.
· For each calendar day of noncompliance, the daily penalty is $500.00 where the record was reported 2 years or more, but less than 3 years, after the required reporting date.
· For each calendar day of noncompliance, the daily penalty is $1,000.00 where the record was reported 3 years or more after the required reporting date.
Additionally, CMS will cap the total penalty for any one instance of noncompliance for a given record at $365,000.00. This tiered system benefits NGHPs that have lower lengths of noncompliance. Waiting three (3) or more years to correct a record will result in the maximum penalty of $1,000.00 per day.
How will CMS select submitted records to monitor for compliance?
CMS will not perform mass, automated monitoring for all NGHP reporting submissions; rather, CMS will audit a randomized sample of new Medicare beneficiary records received each quarter. Each quarter, CMS will evaluate 250 individual Medicare beneficiary records (split proportionately between NGHP and GHP records) for a total of 1,000 individual Medicare beneficiary records per year.
Sanderson Firm Commentary
The Final Rule is, no doubt, less aggressive than the previously proposed rulemaking as it removes bases to impose CMPs (e.g., removal of contradictory reporting data and error threshold tolerance), lessens penalties through a tiered system to account for length of noncompliance, and minimizes the total pool of files that CMS will evaluate each quarter. Do not be fooled; the reality is that these rules, as applied to NGHP reporting data for calendar year 2022 alone, would have resulted in CMPs eclipsing $42 million.
Overall, we are pleased that the Final Rule resolves many compliance gaps identified in the comments of the 2013 Advance Notice of Proposed Rulemaking and the 2020 Proposed Rulemaking; however, some questions still remain. For example, with CMS only monitoring 1,000 submitted beneficiary records per year, how will CMS identify NGHPs that simply never register for Section 111 reporting as required in the first place? Additionally, what is to stop NGHPs from automatically flagging ORM as accepted for all new records regardless of whether ORM was actually accepted? Sure, the NGHP would later be forced to dispute conditional payment recoveries through the administrative appeals process, but the NGHP would completely absolve itself from ORM CMP exposure even though they would have intentionally reported false data to CMS.
These concerns aside, now is the time to evaluate and resolve your reporting compliance gaps. Sometimes, such gaps are only identified through a careful audit of your data. Sanderson Firm recently completed an audit where we uncovered a reporting irregularity that caused a client not to report any TPOCs for certain insurance coverages. The client was unaware of this coding irregularity in their reporting system, and this error likely would have gone unresolved for several more years if not for Sanderson Firm’s auditing solution. An innocent reporting mistake like this could have easily resulted in the maximum daily penalty of $1,000 per day under the Final Rule’s tiered penalty system. For this reason, we strongly encourage NGHPs to obtain professional data audits even though the Final Rule will not become applicable until October 11, 2024.
Sanderson Firm offers a host of services to ensure your compliance with CMPs—namely, our Section 111 reporting solution (which will prevent reporting / coding irregularities), our Section 111 auditing service (which will also identify reporting trends that may lead to potential CMPs), and our CMP pre-notice and formal notice appeal service.
To learn more about Sanderson Firm’s CMP-related reporting services, or for questions about the Final Rule, please contact us. Please also join us for our upcoming webinar discussing the Final Rule on Monday, October 16th at 1:00 PM EST — register here..
